Padgett Stratemann is now RMSAs San Antonio becomes a bigger player in Texas Business, more national firms are entering this market. A national firm does not start from zero. RMS (http://rsmus.com/) purchased Padgett. This gives the buyer a large client base to start with. Typically the local partners have made a handsome profit on their time at the firm. But seeking to recoup the investment, the buyer typically raises fees knowing some business will be lost. RMS has re located from North Loop 410 to 1604 and 281. Renee Foshee, a tax expert with the firm, is the current SA CPA Society President.

Turner Cleveland PCTerry Cleveland has addressed our students. Two of our graduates are employed with at this firm.

Ridout Barrett CPAsTony Ridout has visited and addressed our students many times. We have placed graduates with Ridout for several years.

Financial Consulting Firms

Aventine Hill Partners, Inc.Beth Hair CEO founded Aventine in San Antonio in 2009. The firm now has offices in Dallas, Austin, San Antonio, and Houston. She formerly was with RGP.

Resource Global ProfessionalsSusan Hough has been to campus and spoken to our students. She is the San Antonio Manager of RGP. RGP and Aventine are not CPA firms. Instead they offer contract specialists for firms needing specific tasks such as compliance or Controllerships.

Accounting Information

Acounting Today This is an independent site for accounting news regarding firms and current issues.

Accounting Certifications

Certified Information Systems Auditor CISANow that everything is literally on the computer and cyber security becomes a prominent issue, I see more and more accounting professionals with this designation. Previously known as the Information Systems and Audit Control Association, it now goes by the acronym ISACA.

Geo Politics

Institute for the Study of WarThe Institute for the Study of War advances an informed understanding of military affairs through reliable research, trusted analysis, and innovative education. We are committed to improving the nation’s ability to execute military operations and respond to emerging threats in order to achieve U.S. strategic objectives. ISW is a non-partisan, non-profit, public policy research organization.

StratforThis Austin, TX based site was begun by an ex Texas State Professor.

Socionomics

September 27, 2011

We are studying merchandising companies in ACCT 3301. I mentioned that the Gross Margin percentage is closely watched by such companies. To see what I mean in class I will demonstrate the difference among different firms.

But why wait, you can log into finance.yahoo.com and compare for your self.

How does BIG, DLTR, FDO compare one to the other, don't know those symbols, they are all successful dollar stores, Big Lots, Dollar Tree and Family Dollar.

Now try SHLD, DDDS, JCP, or BBBY. That would be Sears, Dillards, JC Penny and Bed Bath and Beyond.

The discounters have a higher gross margin percentage. They have higher mark ups and distinctly lower overhead. If you compare the GM % of a like group you are performing horizontal analysis, which firm makes the most money on each sale? Understanding how to use accounting information will make you a more successful investor.

The market reacted by jumping the shares about ten percent. And sure enough the analyst above is right, at 98K BRK.A is trading for book value. Please read the analysis. As he says, Buffet does not own options, he owns the stock. Buying shares means there will be fewer shares in the market place, raising the earnings per share. Presumably that will boost the stock price as earnings increase. Note the overall market rallied nicely, see our companion blog http://www.themarketperspective.com.

We are studying financial statements in class. You have heard me say that the cash flow statement is the most important of the bunch. Take a look at EK's Cash Flow Statement. As the saying goes, what's wrong with this picture. EK is not generating cash from any of its sources. The bonds have sold off because investors fear EK will run out of cash and not be able to re-finance its debt or pay creditors.

EK made its money in the film business. Think about it, you took say 24 exposures and had to pay to develop all of them whether you wanted each one or not. What a business. Digital changed all that. So EK bet on kiosks to print photos. But then cell phones became cameras and people stored images digitally. Gee these guys can't get a break. Now EK is trying to get into the printer business. But look at the lead HP and Epson have in that field.

September 23, 2011

The FED hopes the lower rates will boost investment and spending and provide a shot of adrenaline to the beleaguered housing sector.

Wall Street Journal, 9/22/11

The FED has been lowering rates for three years to no avail, and, gee, the market seems to have beaten Ben Bernanke to the punch. Let’s take a look at why we may be much closer to a bottom for risk assets (stocks) than most analysts think.

Ben we’ve been here before. Market opportunities occur at extremes of valuation, which is derived from the extreme social mood of the participants. At the worst of the Fall, 2008 financial crisis, thirty-year bond yields dipped to 2.6%. Today, they are at 2.78%, pretty darned close to that fifty-year extreme. Ten-year note yields are already lower than in 2008! Then the low was just over 2%, yesterday the Ten Year closed at 1.715%.

And this is a replay of the same thing Ben did last summer. QE II was announced/began on August 10, 2011. Bond yields immediately bottomed and bond prices fell for five months. Stocks rallied.

In 1986 I spent a day at the Merrill Lynch trading room in New York City. The bond trader had a fancy computer display for prices and yields. It even allowed the placing of trend lines and such. Today anyone with a discount brokerage account has that. And so literally everyone looks at the same charts. This leads to even more ‘herd following, group think.’ The blogs are awash last night with ‘downside breakdown’ types of comments. And so ‘the crowd’ focuses on even lower prices. But Thursday the New York Stock Exchange had 946 new lows, topping the August 8, 2011 panic low of 943! Or as Joe Granville remarked on Financial News Network after the 1987 crash, ‘when it takes a foot and a half in the newspaper to print the new lows, that’s a low!’

Here is a specific example of what I mean. In the last hour of trading the QQQ, an Exchange Traded Fund which mimics the NASD Composite 100, had a low of 53 for the day. It broke that low and traded to $52.75. Bingo, that was the low. It then marched up to $53.80 in the last half hour. Everyone thinking it was going to new lows was fooled by the false break lower. As we said, no one rings a bell at the bottom. So, we have an extreme in stock market new lows and an extreme in the flight to safety, bond yields, anything else?

Ah yes, there is that most emotional of all indicators, the price of oil. Indeed it dropped 5% Thursday. But at its low of the day , $79.66, it is still above the recent panic intraday low set August 9 at $75.71. Patterson PTEN fell out of bed, breaking its $20 ‘support level.’ That has no doubt turned all bearish and it’s a quick two bucks to the next chart level at $16. We have been warning that the top at $34=35 for PTEN would bring much lower prices, and so PTEN has lost half its value already. Not a good thing for the Permian Basin, but probably over done on a short term basis.

Investors have adopted a rear view mirror strategy. Fearful of being caught in another Fall, 2008 meltdown, all those ‘long term investors’ have fled risk assets like stocks and oil for the ‘safety’ of long government bonds. The markets are some 4,500 DOW points higher now than in March, 2009. But the bond market has dialed in the same degree of fear as when the DOW was 6,666. So, the market is long fear. Funny thing, the US markets are up a bit this Friday morning in pre-opening trading.

When everyone is certain prices must fall further, they usually don’t. Bear markets feature stunning rallies from oversold extremes. Nine Hundred new lows sounds extreme to me. The low may have been yesterday or it may be next week, but no one rings a bell

September 21, 2011

The world of digital photography and video has allowed all sorts of new communication. The Orient Express is a hotel chain, who knew? And they have created a travelogue of a fictional family galavanting all over the world, living the Town and Country lifestyle, impossibly thin but always seen eating, clothes impeccably presented, never crumpled after retrieval from a crushed duffel, yep this is the ticket!

I took me a while to figure out what they were promoting, but it is lifestyle and the hotel chain.

Heck If I thought I would look that thin in one of their videos, I'd check into one of their expensive hotels myself!

Anyway, the quality of the video is impressive, just goes to show you what a bit of creativity can do. Still no recession in First Class on the Orient Express....

September 20, 2011

Monday evening I addressed the San Antonio Society of Women Accountants ASWA. August 5 along with the capable Tony Ridout and Shirley Peterson, I addressed their regional conference here in San Antonio.

This group is having a member ship event for their October 10 meeting. That will be a monday evening at 6:00 PM. Information about the Oct 10 meeting shown below.

The group presently has 41 member and is looking to expand. Yes they have student members.

Art Cashin is the NYSE Floor Manager for UBS as a result of their purchase of Paine Weber.

He is featured on CNBC about 7 55 each morning for a comment, and those comments are posted on the the CNBC website.

Here is Art on the proposed tax increases.

As usual, UBS' Art Cashin, who may suffer the occasional pint but never outright idiocy, cuts right to the chase. His bottom line: "According to the Tax Foundation, after the 1929 crash, Congress proceeded to raise the top marginal tax rate from 25% to 63% by the end of Hoover’s term.... As you may recall, hiking those rates may have made folks feel that rates were more equitable but it sure didn’t help the economy."

NFLX stock has collapsed-about 50% in two months. I have mentioned it as a high flyer on the markets blog. Remember this, stocks go up because there are more buyers than sellers, it is just that simple. And with the concentration of buying in hedge funds, all buying the same few stocks like NFLX, GOOG, AMZN, LULU at the same time, the results can be spectacular-both ways! The change in pricing structure turned out to be the news event that turned the 'school of fish.'

Now, the CEO is apologizing. An alert TAMUSA student mentioned NFLX in the ACCT 3301 class Thursday night. I wanted to be sure to follow up with this event. It is important as a CEO to admit your mistakes but the damage, stock price wise is done.

My take is that a $300 price was an over estimation at the top. But we are in an overall BEAR market, so things like this are going to happen. You can locate lots of speculation as to wether NFLX is about to become the next Blockbuster or whether this will be a buying opportunity.

Fundamental Analysis involves using accounting and finance tools to analyze the internal results for a company. Technical analysis involves analyzing price movements representing the decisions of millions of people with all their market knowledge.

So I quickly eye balled the longer term weekly chart. Each bar is one week of trading for NFLX.

Note the long term uptrend has been broken. Now where did significant buying occur on the way up?

The comment that one should not put someone from the back office,the area that processes trades, into the front office, the area that executes trades. As noted this was true of most rogue traders.

And in talks before the SA Institute of Internal Auditors, I have noted the same thing about Bernie Madoff. As a Principal at the NASD he knew what the NASD auditors looked for, and what they ignored.

Structuring an internal control systems for a brokerage firm amid the derivative trading of today is beyond the limits of this blog post. We study internal control in financial accounting and audit. Perhaps this would make an excellent case study!